Which of the following is likely to be inflationary?
Answer Details
Wages increase is likely to be inflationary.
When wages increase, businesses must pay their employees more, which leads to higher production costs. As a result, businesses may increase the prices of their goods and services to offset the increased costs, which leads to inflation. Additionally, if workers have more money to spend due to higher wages, this can increase demand for goods and services, which can also lead to inflation.
On the other hand, tax increases, an increase in unemployment, and budget surpluses are not likely to be inflationary. Tax increases reduce the amount of money people have to spend, which can decrease demand and lower prices. An increase in unemployment means fewer people have jobs and less money to spend, which can also decrease demand and lower prices. Finally, a budget surplus means the government is taking in more money than it is spending, which can lead to lower interest rates and lower prices.